One of the worst consequences of extended joblessness is what happens after you run through your nest egg, if you were lucky enough to have one. The effect of unpaid or late paid bills and/or being upside down on your mortgage affects your credit rating. But will it affect your job search?

There’s been a lot of noise about the increased use of credit reports in hiring, and how bad credit will sink your battleship. The news doesn’t tell the whole story, though, especially as it applies to IT. Research by the Society for Human Resource Management indicates that employer credit checks haven’t increased since 2004, and only 13 percent of companies polled conduct credit background checks on all job candidates. For those of you with no healthcare, medical debt doesn’t appear to play into the equation at all.

If you’re seeking a gig in government, bad credit could get you bounced from the hiring pool since public sector job standards are fairly stringent. But for private sector venues, both SHRM and HR managers on the ground are more optimistic. If you live in Hawaii, Illinois, Oregon Washington State or Maryland your credit issues are moot. These states restrict the use of credit reports on employment related decisions. However, that’s not to say some of you will be scrutinized more than others, and if your debt is not exclusively due to joblessness you may have some explaining to do.

It’s All About the Circumstances

August Gangi, Senior Vice President at Risk Strategies Company in Boston, finds variables at play when considering an IT candidate with lousy credit. “It depends on what level position, what the project may entail and what could be exposed during the operation,” he says. “If you’re a middle management IT person and you’ve lost your house to foreclosure, I’d want to know why you couldn’t pay your mortgage. If you were laid off and jobless for an extended period of time and your credit situation is clearly articulated and understood, it wouldn’t matter much to me.”

That being said, Gangi and his company have clear boundaries. “If I wasn’t comfortable with how an applicant came to be in a financial predicament outside of a tort — let’s say debt caused by lifestyle choices that may reflect someone’s character — I’d be dubious to hire them. If it’s a high level IT position that allows access to private and confidential client information, the law in Massachusetts is clear and we wouldn’t take the risk.”

The Economy Counts

The international telecommunications company where one professional, let’s call him John A., is an HR manager has hundreds of employees and goes a bit further. “Unless it’s an IT position with access to confidential information, dealing with financial data at the highest level or working with auditors, we wouldn’t even do a credit check,” he says. “Bad credit because of joblessness is not a great concern.”

Allied Business Schools HR Manager Lisa Jimenez feels the same way. “We don’t run credit checks unless it’s a high-level accounting or management position that involves access to sensitive information,” she says. “We do typical DMV and criminal checks, but that’s about it.”

The SHRM poll backs up these hiring managers as well. Ninety one percent said they only conduct credit checks for jobs with financial or fiduciary responsibilities, and less than half check for senior executive positions. For employers who do look at credit history, 87 percent would allow an applicant to explain the results of their report.

Jimenez appears to speak for the majority: “I’m very open-minded about applicants’ financial situation, especially these days. Unless there’s something derogatory on their credit report that indicates something other than extended joblessness, we’re okay with it.”

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Comments

Does the author of this artlcle think Americans are still so in the dark about off-shoring and insourcing that she seeks out such nonsense. These days all an American has to do is to be an American not to get the job.

I agree. Sanjay submits a lie riddled resume and is on boarded with no further vetting. Sam is subjected to skills tests, background checks, drug tests, credit reports and God knows what else when the firm has no intention of hiring him at all.

Actually, USCitizen, I think what the author of this article is saying is all about whether mortgages will hurt you in your job search. Seems reasonable, given how many people worry about it. But that’s just me.

I agree with what Mark said. In addition, I am seeing contract and contract to hire positions, so an American can still find a job. I think I found about 20 jobs in the last 6 years. I was hired in 1976 and laid off in 2003. I don’t think the term FTE existed in 1976, that was just the way you were hired, and I don’t see FTE positions offered now. Our state has 9% unemployment, so if what you are saying is true, why isn’t it nearer to 100%. (Unless you think 91% of our population are foreign nationals.)

I have no idea what percentage of the US population is currently in the hired/job seeking cycle I’m in, but those of us who are job seeking should find it a relief that in most cases, your credit history/rating shouldn’t matter getting the job or not.

It makes sense that the rating does matter if you have access to private information that could make you a lot of money if you misused it. A few years back, I had access to several thousand employee names, SSN, phone #, and home addresses. When I left, I took 0 bytes of that info with me. Imagine the damage I could have done to them if I wasn’t honest. I like to think I would have left with 0 bytes if I was severely in the hole, but I don’t know what kind of pressure that situation would have put me under. Why should they hire me if I was under that kind of pressure?

You lost your house or have credit problems due to JOBLESSNESS.
You’re applying for a JOB.
You CAN’T GET the job because of your CREDIT!
So, I guess you’re supposed to find some piece of job, enough for you to clean up your credit,
so that you can get the job that went to school, trained for and have experience in. It KILLS me that a persons credit would even be a FACTOR in getting a job, how can you correct the problems if you can’t work. Hiring managers need to get their heads out the clouds (IT clouds included) and think about how THEY would feel if they lost THEIR job, house, car etc and couldn’t get another due to their situation.

Couldn’t agree more. I’ve been blessed to just get back to work. Me and my wife’s cards weren’t totally maxed but they are up there.

How in the world is this economy suppose to get better with a system as silly as this. Think about it. Somebody is laid off loses their house, car, etc., and there credit cards are maxed out. With their credit rating in the toilet, they can’t get a job. Unemployment goes up, consumer spending goes down, and with this system of credit checks to GET a job that will allow a person to PAY OFF debt and put money back into the economy is just …. well you get the picture.

Yep… and whats the worst part of all this… consumers get a bad credit record… it affects just about everything they try to do in life for the next seven years but NO… if a company goes bankrupt they just liquidate or get new financing with little penalty.

My understanding is that as of the beginning of this year in Illinois, unless your position has direct financial responsibility, it is illegal to check or use credit history in making hiring decisions.

Will a single late payment make a difference? What about credit score? Is there a minimum score? Will you have the opportunity to refute what is found in the credit report? Which credit reporting agency will they use, there are 3. When a credit check is ran on you, your credit score actually decreases a few points because of the credit check. Do they add these few points back on?

It sounds silly to me that a company will check such things, but list no clear guidance as to disqualifiers. Should an applicant not bother applying for the position at all if she has poor credit, or should she waste time and roll the dice.

Soon your medical history will be used against you. Are you a fatty? You are out of here.

I accually had a company request my permission to look at my medical records as part of employment back in the mid 90’s in Philadelphia. I asked the HR person if she was serious and the reply was yes on the Medical and the Credit check, reasoning was handling of food stuffs ( food processing plant ) I thanked her and took the application back and tore it in half in front of her ( they had sought me out and chased me to come and work for them for 6 months ), to emphasize that I was no longer interested and not to call me. Another job I had recently, the manager came in and asked me about my credit rating ( Chicago ) and why it was poor, explained to him that I had no idea since I have not had a loan or bought anything on credit since 1989 and have no credit cards. I live within my means, the other person hired just came out of bankruptcy due to high credit card bills and that was conidered ok. I have no answers but on the medical – It’s just around the corner.

Explain this to me: When I was job searching, how come EVERY application I filled out online had a form either at the beginning, or the end, that required me to electronically sign to authorize them to do a background check INCLUDING a credit report. There were quite a few positions that I applied for (some IT, some not) that I was fortunate enough to get to the interview stage and in almost every case, I was rejected, and that rejection was followed up by a formal letter from the company, which was then followed by a form letter telling me that the decision was based on information obtained from a credit report under the Fair Credit Reporting Act. I applied for positions ranging from Network Administration to call center positions. Up until the law changed in Illinois in 2010, employers could use your credit information, regardless of the position. In my sister’s company,(she works in HR) she said they used to run credit checks on everyone that applied, regardless of the position, until the law changed last year. I found a job at the end of last year, I was hired because, since the company is headquartered in Colorado, they didn’t run, or use credit information for the position I applied for.

I know other people who work in HR here in Illinois, and up until the change in the law, they ran credit reports on everyone, until the law was changed, and even then, some of them state that their companies skirt the law in many cases and run credit information anyway. Extended joblessness doesn’t matter to some of them. Bad credit is bad credit, and in many places it will still cost you, and if you have been out of work for an extended period, then you are lazy, and not worth hiring anyway. I was out of work for 4 years, I learned quite a bit about how the hiring process works in many companies, and what one has to do to land work. It is discouraging, it is maddening, and it is like fighting a bureaucracy.

So..in a nutshell, the government passes changes to CRA in 1995 and 1999 which eventually leads to a housing bubble.. then the gov’t buys up bad mortgages and paper backed by gov’t funded fred and fann. The bubble bursts, housing prices plummet, gov’t backed paper is worthless, gov’t causes credit crunch. Credit crunch leads to decreased cashflow, investment, reinvestment, and growth. This leads to other sectors of the economy getting smashed… lay-offs follow..

So then someone is out of work (or minimally employed) for over a year.. nest egg is burned through… car gets repo’d, credit cards go to default, etc… Even though the responsible person purchased a reasonably priced house, with a fixed mortgage. and 20% down they are finding it difficult to make ends meet and keep their house… People who bought beyond their means and on ARMs are getting bailouts… you (the responsible person with reasonable house, and nestegg) pays the price.. Your credit gets smashed.

You can’t even get a job at walmart because are ‘over qualified’. The manager at Home Depot tells you “why would I hire you when we train you up and then have you leave in 3 months after you get a ‘real’ job?”… You borrow money from family to save house. You are willing to do anything to keep it together…

Now you get interview for gov’t job but are disqualified because of the poor credit rating that you now have that is ultimately the result of the gov’t created mess in the first place.

Yeah the CRA wasn’t responsible for the “bubble” mortgage companies were. They artificially inflated prices… lied about peoples incomes (this happened to me) all to get me more credit to buy things. Luckily I never took the last 10,000 home improvement loan they offered me or I would already be in the hole. The economic collapse wasn’t caused by people buying more house than they could afford… it was caused by an economic downtown (after we learned after 10 years that Bush tax cuts aren’t job creators and we’re still learning). Once people realized that many people might default… the credit default swaps/obligations the banks had set up (the true criminals in all this) collapsed and then lo and behold AIG (insuring all those CDO’s) collapsed and bingo… economic crisis.

The CRA itself wasn’t but the changes made to it started the process. In 1995 they made illegal the restriction of lending based on where the property was located.. in ’99 they made income verification difficult and in some cases illegal based on the ‘situation’ or race of the borrower. Along with that, they also changed the rules on lending for money down, mortgage types, ARMs, etc..

The mortgage companies (and also the realtors whom I think were a large part of the problem) were playing within the new rules.. Of course they wanted you to borrow as much as possible, they work on commission. the point is that it should have never been allowed because most of these loans were bad paper the minute it was signed. The gov’t rule changes made it possible, and the borrowers were responsible. The problem was that the gov’t backed the bad paper instead of makign the borrowers pay the price on their bad paper and then bailed out the irresponsible borrowers. So they made the loan, and then sold it to freddie almost immediately becasue those are the rules that the gov’t made.

The people who paid 20% down, got fixed rate mortgages, and didn’t go to the ends of their credit limit when purchasing were the ones who did everything right and got hurt for it. They lost their jobs ultimately, had to burn thru the nestegg, and in the end cant get a job because of the BS they had no part in creating.

Credit reporting agencies should come under much tighter scrutiny. I have had wrong information listed on them multiple times. I have written letters to them to have it removed and, by law, they are required to do so, yet, next time I checked, it was still there.

There should be SEVERE financial penalties for such behavior. Also, the algorithm they use to generate your credit score needs to be made public. All this secrecy is bad. For example, if I am looking for a mortgage and want to shop around, each and every time a mortgage company pulls my credit score, it goes down. This is anti-competitive and really thwarts the concept of shopping around for a mortgage. Such behavior needs to be disallowed.

Anyhow, I don’t know of anyone that doesn’t think that credit reporting agencies should be gutted and left to die on the side of the road for all the problems they have caused. There should be one, clear to understand algorithm and only factual data should be reported to one single agency. The method for challenging it and having it removed should be clear and hefty penalties should be in place when the agency does not follow those laws. What happens today is a scam.